‘In order to achieve financial independence, your passive income must exceed your expenses’ Robert Kiyosaki, author of best-selling book ‘Rich Dad Poor Dad’.
With rising expenses and escalating living costs, it is no longer enough to have only one source of income to rely on. Passive income is particularly important because it generates money without your having to invest your time in the process. Putting it in simpler words, you are not obliged to trade pounds for hours but you are still entitled to the profits that come out of the endeavour.
Financial independence depends on individual perspective and may mean different things to different people. For example, financial independence could mean freedom from debt, the ability to switch jobs without feeling stressed or simply the means to afford the kind of life that you always wanted. Regardless of your individual financial goal, a passive income can help you realise your dreams.
How is Generation of Passive Income Important for Financial Independence?
Generating a passive income stream is a key step towards achieving financial independence. Moreover, you have the creative freedom to choose the kind of passive income venture that interests you. A passive income can help reduce reliance on your employer and protects you from proverbially putting all your eggs in one basket.
The truth is that there is a limit to the number of hours that you can work during the day. This automatically implies that there is a corresponding limit on the amount of money that you can earn. Passive earning teaches you to work smarter rather than just harder. Instead of investing additional hours, you are using a ‘remote control strategy’ by putting your money or skills to work for you instead.
Often times, your passive income may outlast your active income as you will stop working when you reach retirement age. With a struggling economy and job redundancy at an all time high, an extra stream of income gives you a feeling of reassurance and self-confidence, which are the most significant by-products of financial independence.
Over time, you can also work to develop multiple sources of passive income that helps build a stronger bridge towards financial independence. A steady stream of passive income reduces your reliance on your employer and protects you from worrying about how you will pay your bills.
No matter how low your passive income might be, even at the basic level, you will still enjoy additional financial elbow space and a comfortable buffer zone in the event of an emergency.
Have you generated passive income streams or are you planning to? Why is creating a passive income important to you? Let us know in the comments!
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